Freelance web developers and independent contractors often manage both their projects and their own benefits. Without access to a traditional employer retirement plan, many turn to the Solo 401k as a way to build long-term savings while reducing taxable income.
Looking to Open a Solo 401k Plan?
Get started today with just a few clicks – The Carry Solo 401k Plan is a featured-packed self-directed account that lets you invest in both traditional and alternative assets, take out a loan, or do a Mega Backdoor Roth conversion with a few clicks.
GET STARTEDSolo 401(k) eligibility and contribution limits depend on IRS rules. Carry does not provide tax advice, consult a tax advisor. Carry Advisors LLC, an SEC-registered investment adviser, provides investment advisory services for discretionary and non-discretionary accounts (e.g., Solo 401(k), IRA, taxable brokerage accounts). Bank and trust accounts are not advised by Carry Advisors. Brokerage accounts are introduced by Global Carry LLC and carried by DriveWealth LLC, both members FINRA/SIPC. Advisory fees may apply and additional disclosures are described in our Form ADV and CRS.
This plan is designed for business owners who don’t have full-time employees. It comes with high contribution limits, tax-deferred or tax-free growth potential, and the ability to invest in a wide range of assets.
Here’s how it works and why it might be worth considering if you code for a living.
📌 Also Read: How to Set Up A Solo 401k Plan
Who Qualifies for a Solo 401k?
Solo 401k plans, also called one-participant 401k plans, are designed for self-employed individuals without full-time staff (other than a spouse). If you’re running your own development business, agency, or working as a 1099 contractor, you likely qualify.
✅ You Must Have Self-Employment Income
This includes income from client projects, retainer work, custom software development, and digital products or tools. Sole proprietors generally report this on Schedule C. If you’re operating through an S corporation, you’ll need to pay yourself a W-2 salary.
✅ You Cannot Employ Full-Time Staff
The IRS defines a full-time employee as someone working over 1,000 hours per year. Hiring subcontractors or part-time help is fine. A spouse working in the business may also participate in the plan.
✅ Any Legal Business Structure Works
Sole proprietors, LLCs, partnerships, and S corps are all eligible. The key requirement is that your business has no full-time employees other than you or your spouse.
📝 Note: If you eventually hire a full-time developer or assistant, you’ll need to transition to a traditional 401k plan that covers employees.
📌 Also Read: Important Forms for Solo 401k Owners
Things to Prepare Before Opening a Solo 401k Plan
Before you sign up for a Solo 401k, make sure a few things are in order:
✅ Track Your Income Correctly
Your contribution limits depend on your net earnings or W-2 salary, depending on your business structure. Keep detailed records of income and expenses.
✅ Spousal Contributions (If Applicable)
If your spouse helps with operations, project management, or bookkeeping, they can also open their own account under the same Solo 401k plan.
✅ Proper Business Registration
You don’t need to be incorporated, but you must operate a real business and file the correct tax forms annually.
Why Solo 401ks Work for Web Developers
If your development business is growing, your retirement plan should grow with it. A Solo 401k is one of the few plans that scales as your income increases—and they may offer tax advantages along the way.
High Contribution Limits for 2025
As both “employee” and “employer,” you can contribute in two ways:
- Employee contributions: Up to $23,500
- Age 50 or older: Add an extra $7,500 (catch-up)
- Ages 60–63: May qualify for an additional $11,250
- Employer contributions: Up to 25 percent of compensation
- Combined contribution limit: Up to $70,000 (or $81,250 with all catch-up contributions)
📝 Note: These are maximum limits. Your exact contribution depends on your income and whether you’re structured as a sole proprietor, partnership, or S corp.
Traditional or Roth: You Choose
You may choose between two tax strategies:
- Traditional contributions lower your taxable income today but are taxed later when withdrawn.
- Roth contributions are made with after-tax dollars, but qualified withdrawals are tax-free in retirement.
Many platforms support both options, giving you flexibility to mix and match.
What Can You Invest In?
Most Solo 401k providers give you access to mutual funds, index funds, and ETFs. Some also allow for individual stocks and private investments, though these come with restrictions. Be sure to follow IRS rules to avoid triggering penalties.
What to Expect as a Solo 401k Owner
Running a Solo 401k means wearing two hats: plan participant and plan administrator. That means you’re responsible for both contributions and compliance.
Benefits:
✅ Higher contribution limits than most retirement accounts
✅ Tax flexibility with Traditional and Roth options
✅ Broad investment access
✅ Spouse can contribute if involved in the business
Your responsibilities:
- File Form 5500-EZ annually if plan assets exceed $250,000
- Transition to a group 401k if you hire full-time employees
- Maintain records of all contributions, withdrawals, and plan documents
📝 Tip: Consider working with a tax or financial advisor to make sure your plan is set up correctly and you’re getting the full benefit.
📌 Also Read: Solo 401k Vs SEP IRA
Final Thoughts: Is a Solo 401k a Good Fit for Web Developers?
If you’re self-employed and coding full-time, a Solo 401k could be a strong fit. It’s designed for people who don’t have access to employer-sponsored retirement plans but want to save meaningful dollars as their income grows.
Track your income, understand your structure, and explore both Traditional and Roth options. And if you need help, a quick consultation with a tax or financial professional can help you decide if it’s the right fit for your business.
📌 Looking for more ways to manage freelance income? Read:
Disclaimer:
The Carry Learning Center is operated by The Vibes Company Inc. (“Vibes”) and contains generalized educational content about personal finance topics. While Vibes provides educational content and technology services, all investment advisory services discussed on this website are provided exclusively through its wholly-owned subsidiary, Carry Advisors LLC (“Carry Advisors”), an SEC registered investment adviser. The information contained on the Carry Learning Center should not be construed as personalized investment advice and should not be considered as a solicitation to buy or sell any security or engage in a particular investment, accounting, tax or legal strategy. Vibes is not providing tax, legal, accounting, or investment advice. You should consult with qualified tax, legal, accounting, and investment professionals regarding your specific situation.
The accounts, strategies and/or investments discussed in this material may not be suitable for all investors. All investments involve the risk of loss, and past performance does not guarantee future results. Investment growth or profit is never a guarantee. All statements and opinions included on the Carry Learning Center are intended to be current as of the date of publication but are subject to change without notice.
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